Obama's budget proposal may include cuts to social security, taxes on wealthy

President Obama's budget proposal may include cuts to benefit programs and more taxes on the wealthy.

US President Barack Obama on April 3, 2013 in Denver, Colorado. Obama will reportedly propose a budget compromise which includes calling for higher taxes on the wealthy and cuts to Social Security. (Doug Pensinger/AFP/Getty Images)

President Barack Obama might propose reductions in Social Security and other benefit programs in exchange for more taxes on the wealthy in an effort to strike a compromise with Republicans in his annual budget.

A senior administration official told the Associated Press that the proposal aims to balance Obama's demand for higher taxes on the wealthiest Americans with the Republicans' demands for reductions in entitlements.

The most controversial portion of the proposal, to be released next week, is "chained CPI," an adjustment that would change the way we measure cost-of-living and in effect reduce Social Security and other benefit programs by tying them to inflation.

Obama will also call for $9 billion in new tax revenue by limiting "tax-preferred retirement accounts for millionaires and billionaires," according to Politico.

The New York Times framed the proposal as a political risk, saying it would "embody the final compromise offer that he made to [House] Speaker John A. Boehner late last year."

The White House will also propose higher taxes on cigarettes and rules that would prevent people from collecting disability and unemployment benefits at the same time.

The proposal would reduce $1.8 trillion from the deficit over 10 years, according to The Wall Street Journal. Around $700 billion of that would come from changes in the tax code. A senior administration official told The Journal that this would lower the deficit by 2.8 percent by 2016 and 1.7 percent by 2023.